Yes, Dorothy, it could happen here

It may be the case the Ambrose Evans Pritchard has a taste for the overly ambitious headline, and that the facts are not as alarming as the headline makes out, but they're still fairly alarming facts nonetheless.

Basically Portugal has breached the arbitrary limits set by the European (in)Stability Pact, which is part and parcel of Economic and Monetary Union. The European Commission have now said that they are "legally obliged" to take action against Portugal. This could take a number of forms.

1) A massive fine, about 0.75% of Portugal's GDP.
2) Portugal effectively ceding taxing and spending control to the master budgeteers of the European Commission, those chaps whose budget has been refused an audit certificate for five years due to rampant corruption.
3) The whole thing could come crashing down in the nick of time because France is also in trouble.

There may even be some riots in Lisbon, which would play well for a referendum on joining the Euro.

You may think that you've heard this all before. Germany, Italy, France and Belgium are all technically in default one way or the other and nothing serious happens to any of them. The point being that these are in the "magic circle" of original members (the other two are the Netherlands and Luxemburg). Plucky littly Portugal is not.

Could the same happen to us if we join the Euro? Put good money on it.